AB490,71,21
21701.0503 (title)
Exceptions to spendthrift provision.
AB490,98
22Section
98. 701.0504 of the statutes is created to read:
AB490,72,2
23701.0504 Discretionary trusts; effect of standard. (1) For purposes of this
24subchapter, and except as provided in sub. (3), a beneficiary's interest in a trust that
25is subject to the trustee's discretion does not constitute an interest in property or an
1enforceable right even if the discretion is expressed in the form of a standard of
2distribution or the beneficiary is then serving as sole trustee or cotrustee.
AB490,72,7
3(2) Except as provided in this subchapter, a creditor or other claimant may not
4attach present or future distributions from a beneficiary's interest in property or an
5enforceable right, obtain an order from a court forcing the judicial sale of the interest
6or compelling the trustee to make distributions, or reach the interest or right by any
7other means, even if the trustee has abused the trustee's discretion.
AB490,72,11
8(3) Subsections (1) and (2) do not apply if a beneficiary is acting as sole trustee
9of a trust for his or her benefit and his or her discretion to make distributions to
10himself or herself is not limited by an ascertainable standard or the consent of a party
11holding an adverse interest to the beneficiary.
AB490,72,14
12(4) (a) Except as provided in par. (b), this section does not limit the right of a
13beneficiary to maintain a judicial proceeding against a trustee for an abuse of
14discretion or failure to comply with a standard for distribution.
AB490,72,1615
(b) The right of a beneficiary described in par. (a) may not be exercised by a
16creditor.
AB490,99
17Section
99. 701.0505 of the statutes is created to read:
AB490,72,20
18701.0505 Creditor's claim against settlor. (1) (a) Whether or not the terms
19of a trust include a spendthrift provision and except as provided in par. (b), the
20following rules apply to claims of a settlor's creditors:
AB490,72,2221
1. During the lifetime of the settlor, the property of a revocable trust is subject
22to claims of the settlor's creditors.
AB490,73,523
2. With respect to an irrevocable trust that is not a trust for an individual with
24a disability, upon application of a judgment creditor of the settlor, the court may, if
25the trust instrument requires or authorizes the trustee to make payments of income
1or principal to or for the settlor, order the trustee to satisfy part or all of the judgment
2out of part or all of the payments of income or principal as they are due, presently
3or in the future, or which are payable in the trustee's discretion. If a trust has more
4than one settlor, the amount the judgment creditor of a particular settlor may reach
5may not exceed the settlor's interest in the trust.
AB490,73,126
3. After the death of a settlor, and subject to the settlor's right to direct the
7source from which liabilities will be paid, the property of a trust that was revocable
8at the settlor's death is subject to claims of the settlor's creditors, costs of
9administration of the settlor's estate, the expenses of the settlor's funeral and
10disposal of remains, and statutory allowances to a surviving spouse and children to
11the extent the settlor's probate estate is inadequate to satisfy those claims, costs,
12expenses, and allowances.
AB490,73,1413
(b) Assets of a trust that are exempt from claims of creditors under other
14statutes are not subject to par. (a).
AB490,73,15
15(2) For purposes of this subchapter, all of the following apply:
AB490,73,1816
(a) During the period the power may be exercised, the holder of a power of
17withdrawal is treated in the same manner as the settlor of a revocable trust to the
18extent of the property subject to the power.
AB490,73,2019
(e) 1. Contributions to the following trusts are not considered to have been
20contributed by the settlor:
AB490,73,2421
a. An irrevocable marital trust that is treated as qualified terminable interest
22property under section
2523 (f) of the Internal Revenue Code if after the death of the
23settlor's spouse the settlor is a beneficiary of the trust or an irrevocable trust that
24receives property from the trust.
AB490,74,4
1b. An irrevocable marital trust that is treated as a general power of
2appointment trust under section
2523 (e) of the Internal Revenue Code if after the
3death of the settlor's spouse the settlor is a beneficiary of the trust or an irrevocable
4trust that receives property from the trust.
AB490,74,75
c. An irrevocable trust for the settlor's spouse if after the death of the settlor's
6spouse the settlor is a beneficiary of the trust or an irrevocable trust that receives
7property from the trust.
AB490,74,108
d. An irrevocable trust for the benefit of a person, the settlor of which is the
9person's spouse, regardless of whether or when the person was the settlor of an
10irrevocable trust for the benefit of that spouse.
AB490,74,1211
e. An irrevocable trust for the benefit of a person to the extent that the property
12of the trust was subject to a general power of appointment in another person.
AB490,74,1413
2. A person who would otherwise be treated as a settlor of a trust described in
14subd. 1. a. to e. is not treated as a settlor of the trust.
AB490,74,1815
3. For purposes of this paragraph, notwithstanding s. 701.0103 (3),
16"beneficiary" means a person who satisfies s. 701.0103 (3) (a) or (b) and who is
17designated in a trust instrument or through the exercise of a special or general power
18of appointment.
AB490,74,20
19(3) Any order entered by a court under this section is subject to modification
20upon application of an interested person.
AB490,100
21Section
100. 701.0506 of the statutes is created to read:
AB490,75,2
22701.0506 Overdue distribution. (1) In this section, "mandatory
23distribution" means a distribution of income or principal that the trustee is required
24to make to a beneficiary under the terms of the trust, including a distribution upon
1termination of the trust. "Mandatory distribution" does not include a distribution
2subject to the exercise of the trustee's discretion even if any of the following applies:
AB490,75,33
(a) The discretion is expressed in the form of a standard of distribution.
AB490,75,54
(b) The terms of the trust authorizing a distribution couple language of
5discretion with language of direction.
AB490,75,10
6(2) Whether or not a trust contains a spendthrift provision, a creditor or
7assignee of a beneficiary may reach a mandatory distribution of income or principal,
8including a distribution upon termination of the trust, if the trustee has not made
9the distribution to the beneficiary within a reasonable time after the designated
10distribution date.
AB490,101
11Section
101. 701.0507 of the statutes is created to read:
AB490,75,14
12701.0507 Personal obligations of trustee. Trust property is not subject to
13personal obligations of the trustee, even if the trustee becomes insolvent or
14bankrupt.
AB490,102
15Section
102. 701.06 (title), (1), (2), (3) and (6) (title) and (a) of the statutes are
16repealed.
AB490,103
17Section
103. 701.06 (4) of the statutes is renumbered 701.0503 (1), and
18701.0503 (1) (intro.) and (b), as renumbered, is amended to read:
AB490,75,2219
701.0503
(1) Claims for child support. (intro.) Notwithstanding
any provision
20in the creating instrument or subs. (1) and (2) s. 701.0502, upon application of a
21person having a valid order directing a beneficiary to make payment for support of
22the beneficiary's child, the court may
do any of the following:
AB490,76,223
(b)
In If the case of a beneficiary
under a discretionary may receive income or
24principal at the trustee's discretion under the trust, order the trustee to satisfy part
25or all of the claim out of part or all of future payments of income or principal
which
1that are
to be made pursuant to the exercise of the trustee's discretion in favor of such
2beneficiary.
AB490,104
3Section
104. 701.06 (5) (intro.) and (a) of the statutes are renumbered
4701.0503 (2) (intro.) and (a) and amended to read:
AB490,76,125
701.0503
(2) Claims for public support. (intro.) Notwithstanding
any
6provision in the creating instrument or subs. (1) and (2) s. 701.0502 and except as
7provided in sub. (3), if the settlor is legally obligated to pay for the public support of
8a beneficiary under s. 46.10, 49.345, or 301.12 or the beneficiary is legally obligated
9to pay for the beneficiary's public support or
that
for support furnished
to the
10beneficiary's spouse or minor child under s. 46.10, 49.345, or 301.12, upon
11application by the appropriate state department or county official, the court may
do
12any of the following:
AB490,76,1513
(a) If
such the beneficiary is entitled to receive income or principal under the
14trust, order the trustee to satisfy part or all of the liability out of part or all of
15payments of income or principal as they are due, presently or in the future;
AB490,105
16Section
105. 701.06 (5) (b) of the statutes is renumbered 701.0503 (2) (b) 1. and
17amended to read:
AB490,76,2318
701.0503
(2) (b) 1. Except as
otherwise provided in
par. (c), in the case of a
19beneficiary under a discretionary trust subd. 2., if the beneficiary may receive income
20or principal at the trustee's discretion under the trust, order the trustee to satisfy
21part or all of the liability out of part or all of future payments of income or principal
22which are to be made pursuant to the exercise of the trustee's discretion in favor of
23such the beneficiary
;
.
AB490,106
24Section
106. 701.06 (5) (c) of the statutes is renumbered 701.0503 (2) (b) 2. and
25amended to read:
AB490,77,5
1701.0503
(2) (b) 2. In the case of a beneficiary
under a discretionary trust who
2may receive income or principal of the trust at the trustee's discretion and who is a
3settlor or a spouse or minor child of the settlor, order the trustee to satisfy part or all
4of the liability without regard to whether the trustee has then exercised or may
5thereafter exercise the trustee's discretion in favor of the beneficiary.
AB490,107
6Section
107. 701.06 (5m) of the statutes is renumbered 701.0503 (3) and
7amended to read:
AB490,77,168
701.0503
(3) Trust for disabled an individual with a disability. Subsection
9(5) (2) does not apply to any trust
that is established for
the benefit of an individual
10who has with a disability
which has continued or can be expected to continue
11indefinitely, substantially impairs the individual from adequately providing for his
12or her own care or custody, and constitutes a substantial handicap to the afflicted
13individual if the trust does not result in ineligibility for public assistance under ch.
1449. A trustee of a trust which is exempt from claims for public support under this
15subsection shall notify the county department under s. 46.215 or 46.22 in the county
16where the disabled beneficiary resides of the existence of the trust.
AB490,108
17Section
108. 701.06 (6) (b) of the statutes is renumbered 701.0505 (2) (b), and
18701.0505 (2) (b) 2., as renumbered, is amended to read:
AB490,77,2119
701.0505
(2) (b) 2. The beneficiary's right to withdraw part of the trust
20property, to the extent that the value of the property affected by the lapse, waiver,
21or release in any year does not exceed the greater of the
amount in following:
AB490,77,2322
a.
Section The amount referenced in section 2041 (b) (2) or 2514 (e)
, of the 23Internal Revenue Code
of 1986.
AB490,78,224
b.
Section The amount referenced in section 2503 (b)
, of the Internal Revenue
25Code
of 1986 for each individual other than the beneficiary who makes a transfer to
1the trust or who is deemed to make a transfer to the trust pursuant to an election to
2split gifts under section 2513 (a) of the Internal Revenue Code.
AB490,109
3Section
109. 701.06 (6) (c) of the statutes is renumbered 701.0505 (2) (c), and
4701.0505 (2) (c) (intro.), 1. a. and b. and 4., as renumbered, are amended to read:
AB490,78,95
701.0505
(2) (c) (intro.) A beneficiary of a trust is not a settlor, has not made a
6voluntary or involuntary transfer of the beneficiary's interest in the trust,
or and 7does not have the power to make a voluntary or involuntary transfer of the
8beneficiary's interest in the trust solely because the beneficiary holds
or, exercises,
9or allows in any capacity, any of the following:
AB490,78,1110
1. a. Exercisable only
on with the consent of another person holding an interest
11adverse to the beneficiary's interest.
AB490,78,1312
b. Limited by an ascertainable standard
, such as health, education, support,
13or maintenance of the beneficiary.
AB490,78,1414
4. A presently exercisable right described in
par. (b) 2. sub. (2) (b).
AB490,110
15Section
110. 701.06 (6) (d) of the statutes is renumbered 701.0505 (2) (d).
AB490,111
16Section
111. 701.06 (7) of the statutes is renumbered 701.0503 (4) and
17amended to read:
AB490,78,2018
701.0503
(4) Subsequent modification of court's order. Any order entered by
19a court under sub.
(4), (5) (1) or
(6) (a) is subject to modification (2) may be modified 20upon application of an interested person.
AB490,112
21Section
112. 701.06 (8) of the statutes is renumbered 701.0503 (5) and
22amended to read:
AB490,78,2523
701.0503
(5) Exempt assets. Assets of a trust
, to the extent they that are
24exempt from claims of creditors under other statutes
, shall are not
be subject to sub.
25(4), (5), (1) or
(6) (a) (2).
AB490,113
1Section
113. Subchapter VI (title) of chapter 701 [precedes 701.0601] of the
2statutes is created to read:
AB490,79,44
subchapter VI
AB490,79,55
Revocable trusts
AB490,114
6Section
114. 701.0601 of the statutes is created to read:
AB490,79,9
7701.0601 Capacity of settlor of revocable trust. The capacity required to
8create, amend, revoke, or add property to a revocable trust, or to direct the actions
9of the trustee of a revocable trust, is the same as that required to make a will.
AB490,115
10Section
115. 701.0602 of the statutes is created to read:
AB490,79,15
11701.0602 Revocation or amendment of revocable trust. (1) Unless the
12terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke
13or amend the trust. This subsection does not apply to a trust created under an
14instrument executed before the effective date of this subsection .... [LRB inserts
15date].
AB490,79,17
16(2) If a revocable trust is created or funded by more than one settlor, all of the
17following apply:
AB490,79,2018
(a) To the extent the trust consists of marital or community property, the trust
19may be revoked by either spouse acting alone but may be amended only by joint
20action of both spouses.
AB490,79,2321
(b) To the extent the trust consists of property other than marital or community
22property, each settlor may revoke or amend the trust with regard to the portion of
23the trust property attributable to that settlor's contribution.
AB490,80,3
1(c) Upon the revocation or amendment of the trust by fewer than all of the
2settlors, the trustee shall promptly notify the other settlors of the revocation or
3amendment.
AB490,80,5
4(3) A settlor may revoke or amend a revocable trust by any of the following
5means:
AB490,80,66
(a) By substantial compliance with a method provided in the terms of the trust.
AB490,80,87
(b) If the terms of the trust do not provide a method, by any of the following
8means:
AB490,80,109
1. A later will or codicil that expressly refers to the trust or specifically devises
10property that would otherwise have passed according to the terms of the trust.
AB490,80,1211
2. Any other method manifesting clear and convincing evidence of the settlor's
12intent.
AB490,80,16
13(4) Upon revocation of a revocable trust, the trustee shall transfer the trust
14property as the settlor directs. However, with respect to marital or community
15property, the trustee shall transfer the property to both spouses as marital or
16community property.
AB490,80,19
17(5) A settlor's powers with respect to revocation, amendment, or distribution
18of trust property may be exercised by an agent under a power of attorney only to the
19extent expressly authorized by the terms of the power of attorney.
AB490,80,23
20(6) A guardian of the estate or a conservator of the settlor may exercise a
21settlor's powers with respect to revocation, amendment, or distribution of trust
22property only with the approval of the court supervising the guardianship or
23conservatorship.
AB490,81,2
24(7) A trustee who does not know that a trust has been revoked or amended is
25not liable for distributions made and other actions taken on the assumption that the
1trust had not been amended or revoked, or for distributions made pursuant to sub.
2(5).
AB490,116
3Section
116. 701.0603 of the statutes is created to read:
AB490,81,7
4701.0603 Settlor's powers; powers of withdrawal. (1) While a trust is
5revocable, the rights of the beneficiaries are subject to the control of, and the duties
6of the trustee, a directing party, and a trust protector are owed exclusively to, the
7settlor.
AB490,81,9
8(2) If a revocable trust has more than one settlor, the duties of the trustee, a
9directing party, and a trust protector are owed to all of the settlors.
AB490,81,12
10(3) During the period in which a power of withdrawal may be exercised, the
11holder of the power has the rights of a settlor of a revocable trust under this section
12to the extent of the property subject to the power.
AB490,117
13Section
117. 701.0604 of the statutes is created to read:
AB490,81,17
14701.0604 Limitation on action contesting validity of revocable trust;
15distribution of trust property. (1) A person must commence a judicial proceeding
16to contest the validity of a trust that was revocable immediately before the settlor's
17death within the earlier of the following:
AB490,81,1818
(a) One year after the settlor's death.
AB490,81,2319
(b) Four months after the trustee sent the person a copy of the trust instrument
20and a notice informing the person of the trust's existence, of the trustee's name and
21address, and of the time allowed for commencing a proceeding. Except as provided
22in s. 701.0813 (2), a trustee is not liable to any person for not providing the
23information described in this paragraph.
AB490,82,2
24(2) Upon the death of the settlor of a trust that was revocable immediately
25before the settlor's death, the trustee may proceed to distribute the trust property
1in accordance with the terms of the trust. The trustee is not subject to liability for
2doing so unless one of the following applies:
AB490,82,43
(a) The trustee knows of a pending judicial proceeding contesting the validity
4of the trust.